Avio’s CEO on sharing the pie with Germany

The recent German-Italian agreement to divide production of casings for the future Ariane 6 rocket’s strap-on boosters, which also serve as the first stage of the Italian-led Vega-C small-satellite launcher, was a victory for political harmony in Europe.

But what about the Ariane 6 and Vega business models? Scrapping a single producer of casings, Avio SpA of Colleferro, Italy, in favor of dual sourcing with OHB-owned MT Aerospace of Augsburg, Germany, will reduce the scale economies that are part of the overall Ariane 6/Vega cost equation.

The German side argued that a new technology will reduce casing cost by 30 percent, compensating for the costs incurred in creating and maintaining two separate production lines.

In an interview, Avio Chief Executive Giulio Ranzo conceded the cost penalty with a divided production line but said the German technology, in addition to achieving political consensus in Europe, is worth the effort.

The current-generation Vega has successfully conducted its first seven missions. The eighth launch, of Turkey’s Gokturk optical Earth observation satellite, is scheduled for Dec. 5.

Starting in 2019, the upgraded Vega-C is expected to be operational. It has 50 percent more payload-carrying power than the current Vega, capable of placing 2,300 kilograms of satellite payload into a sun-synchronous orbit.

Ranzo discussed the ongoing effort to reduce Vega’s production and operating costs, the bittersweet agreement with Germany and what he said was his firm intention to help Arianespace win contracts to launch Italy’s two Cosmo-SkyMed-2 radar reconnaissance satellites.

To get Vega costs down you need to launch at least three times at year?

Yes, and even more than three. We already did three last year. The flight frequency is mainly a case of whether the satellites are delivered on time. Arianespace has already sold 10 Vega launchers for the next three years so we presume an average rate of three per year

What about Vega operating costs at the European spaceport in French Guiana?

In each of the seven flights we have managed, we’ve reduced systematically the duration of the launch campaign, including the launcher’s integration, down to a point where we have no more capacity bottlenecks at the launch site and can do four launches in a given year, perhaps even five.

How long is the campaign now?

Around 23 days. We can possibly trim it a little bit more. Arianespace has demonstrated it can do 12 launches a year between Ariane 5, Soyuz and Vega, and we think we can do 15.

What is Avio’s ambition in Arianespace?

We have an important partner in Arianespace and with Airbus Safran Launchers, the Ariane 6 prime contractor. We want to realize as many synergies as we can between the two prime contractors, Avio and ASL, to optimize cost and make the offer more competitive.

We have reached a consensus on the synergies. Vega-C and Ariane 6 will be so linked to each other with the first stage of Vega being the strap-on booster for Ariane 6 that both are incentivized together. The more we optimize one launcher, the more we optimize the other.

You are a big industrial player, but a small Arianespace shareholder.

We are a 3 percent shareholder in Arianespace. The issue here is not one of equity ownership. Arianespace is our selected gateway to the market. The equity share is irrelevant. It makes sense for ASL to have the majority stake. And once they have the majority it doesn’t matter whether we have a 25 percent share or a 3 percent.

Italy and Germany agreed to divide production of the P120 casing between you and MT Aerospace of Germany on the assumption that MT’s technology ultimately lowers production cost. What if it doesn’t?

If we knew all the answers to new technology and new programs that would mean there is no challenge. This decision signals that European industry is truly making an effort for change, and even pointing at a target which they are not necessarily sure they will reach.

European member states have agreed to build a new family of launchers that needs to be much more cost competitive. The decision on the second production line doesn’t surprise me. It’s similar to other challenges were are having in many other parts of the launcher and the cost of ground operations.

We have big challenges and we accept them. We are confident that we can achieve good results.

Doesn’t consolidating production all at one site reduce unit costs compared to running two separate facilities?

Yes, but I am an industrialist, not a policymaker. These are political-level decisions, not industrial. If Ariane 6 was mine, I would be doing it all in one place. But Ariane 6 is a European program that has the participation of many countries. We need to take that into account.

You sized the industrial plant in Colleferro for 35-40 boosters per year and gave Airbus Safran Launchers price quotes based on that. Now production will be divided. What is the effect on your operation?

It’s more complicated than that. Avio has full responsibility for the integrated motor case, which is composed of many different parts — all ultimately assembled in Colleferro. So our production capacity is not cut by half.

Certain activities are going to be procured from Germany, hopefully with a more competitive technology that, overall, will make it more cost competitive. This is viable, and why not?

But the production activities will not be 50-50 between Germany and Italy. Only certain activities will be split 50-50. For example, the overall assembly of the insulated motor cases for P120, the external insulation, all the other equipment installed externally, will be done in Italy and then shipped to the launch site.

So all the production in Germany will be shipped to Colleferro before final departure?

That’s correct. They will primarily be doing the booster case in carbon fiber material with a slightly different technology than ours. Then, for practical reasons, they will also apply the internal thermal protection. But to complete an insulated motor case, there are different parts that need to be assembled together, including the liner for the internal part of the motor case, which separates the internal core of the case from the propellant. It’s a very delicate part and we are familiar with this because of course we manufacture propellant. We will install this for all the booster cases.

The external thermal production will also be installed by us as we have significant experience with that, as well as the overall finishing of the product, which will be done here.

The German minister responsible for space applauded the agreement as being a boost for Germany’s return and great news for Germany.

Certainly it is good news for Germany that they are doing one-half of the carbon-fiber booster cases and the application of the internal thermal protection. If they are successful with this innovative technology, they will come up to speed being competitive and state of the art.

That’s good for us as well, and all of European industry. Otherwise the current technology would very soon become obsolete. And I think for them it is good to stay in the game.

And if the cost savings don’t materialize? Someone presumably will pay the bill, and I guess it’s not Avio.

You can rest assured of that. The member states will at that point analyze the situation and determine what to do. But we will not just go to sleep and then wake up in 2025 and find out that unfortunately the cost is too high. It’s a development path. As we approach different milestones, we will assess issues and define corrective actions.

The same question could be raised about any part of the Ariane 6 program, which is based on being extremely cost competitive: Are we sure that the cost targets will be met? If not, then what?

If we only set targets we were sure we could meet, I would tell you we are not building a competitive launcher.

When does the new production line start in Germany?

They will start to manufacture flight items by 2021, or 2022, depending on when their development is completed and qualified. Bu we have intermediate milestones to see how we’re doing — in particular, in mid-2018, when we have an important milestone review. We will see then where we stand.

So the full-up production capacity at Augsburg won’t occur until Vega-C has been in operation for three years?

Around there, yes. The first first flight items for both Ariane 6 and Vega-C will be produced by us.

You sound remarkably cheerful about all this.

Look, every one of us would like to be king. We all would love to have everything for ourselves. But then we would not be participating in a cooperative effort in Europe. Again: If Ariane 6 was mine, I would want it all here! But that would not work because then you would not have sufficient financial resources for development.

Our system is very simple: collaboration and competitiveness. There’s no way we can be successful if we don’t apply the two. At this juncture, Germany will contribute significant resources for development and contribute resources to achieve more competitiveness. If these two things work together, I will be happy. If they don’t, then we will analyze the situation.

Is Vega-C is still on schedule for a 2019 flight?

Yes, mid-2019 for the first flight.

Could Vega-C lift a second-generation Cosmo-SkyMed radar Earth observation satellite being built for the Italian government?

Vega-C will be fit for either of the two satellites being built. But we need to see when the first of them is actually ready for flight. And then we will see whether it will fly with Vega-C or with Soyuz or something else.

Like SpaceX?

Or SpaceX. But that would surprise me. The customer will analyze the tradeoffs between reliability and price and the European nature of the deal. I would happily advertise for the choice of Vega-C — no doubt about it. My role in marketing is within Arianespace and believe me, they are very vocal in advertising our products.

But on purely technical terms, you have done the engineering and Vega-C can lift a second-generation Cosmo-SkyMed?

Correct, and we definitely want to fly Cosmo-SkyMed. I will be very vocal with my Italian customer to make that happen. I will promote, with Arianespace, the idea that we will do the impossible to make it happen.

There have been tweets about SpaceX from Italy after a visit to SpaceX by ASI, the Italian space agency.

Yes, but they come more often to visit me than to SpaceX in California. And a tweet is not a contract. Cosmo-SkyMed is a cooperation between ASI and the Italian Ministry of Defense. The decision probably won’t be based on tweets.